S&P Threatens To Cut UK's AAA!

Joe Weisenthal

May 21, 2009, 5:53 AM

This is pretty big. Ratings agency S&P has lowered its rating on the UK to "negative" from "stable".

Bloomberg: Britain would become the fifth western European Union nation to lose its rating because of the economic slump, following Ireland, Greece, Portugal and Spain. The U.K. plans to sell a record 220 billion pounds ($343 billion) of bonds in the fiscal year through March 2010 as the recession cuts revenue and forces the government to raise spending.

"We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100 percent of gross domestic product and remain near that level in the medium term," S&P analysts led by David Beers in London, said in a report today.

The difference, of course, between the UK and those other countries, is that the UK remains a crucial financial center -- though the prospect that the government could have to bail out one or more of the major banks has obviously contributed to concerns about the country.

Not surprisingly, the downgrade slammed UK markets. The FTSE fell 2.5% and the pound slide over 1% against the euro.